Marriott International Reports Third Quarter Results
BETHESDA, Md., Oct 08, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Marriott International, Inc. ("Marriott") (NYSE: MAR) today reported third quarter 2009 adjusted income from continuing operations attributable to Marriott of $53 million, a 57 percent decline over the year-ago quarter, and adjusted diluted earnings per share ("EPS") from continuing operations attributable to Marriott shareholders of $0.15, down 55 percent. The company's EPS guidance for the 2009 third quarter, disclosed on July 16, 2009, totaled $0.09 to $0.14.
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The reported loss from continuing operations attributable to Marriott was $466 million in the third quarter of 2009 compared to reported income from continuing operations attributable to Marriott of $94 million in the year-ago quarter. Reported diluted losses per share from continuing operations attributable to Marriott shareholders was $1.31 in the third quarter of 2009 compared to diluted EPS from continuing operations attributable to Marriott shareholders of $0.25 in the third quarter of 2008.
Adjusted results for the 2009 third quarter exclude $752 million pretax ($502 million after-tax and $1.41 per diluted share) of impairment charges, which Marriott previously disclosed, related to the timeshare segment. See the table on page A-14 of the accompanying schedules for the detail of these impairment charges and their placement on the Consolidated Statements of Income.
Adjusted results for the 2009 third quarter also exclude $8 million pretax ($4 million after-tax and $0.01 per diluted share) of restructuring costs and other charges. Restructuring costs totaled $9 million pretax and primarily included severance costs and timeshare facilities exit costs. Other charges totaled $1 million of pretax earnings and primarily reflect the $3 million favorable impact of the revaluation of residual interests from prior timeshare note sales due to three default triggers curing in the quarter, partially offset by $2 million of reserves for guarantees and contract cancellations. Of the total restructuring costs and other charges in the third quarter, cash payments are expected to be $5 million. See the table on page A-13 of the accompanying schedules for the detail of these restructuring costs and other charges and their placement on the Consolidated Statements of Income.
Finally, adjusted results for the 2009 third quarter also exclude a $13 million after-tax non-cash charge ($0.03 per diluted share) in the provision for income taxes primarily related to the treatment of funds received from certain foreign subsidiaries that is in ongoing discussions with the Internal Revenue Service. Adjusted results for the 2008 third quarter exclude a $29 million after-tax non-cash charge ($0.08 per diluted share) in the provision for income taxes primarily related to a 1994 tax planning transaction.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, "Revenue per available room across our North American system declined less than expected during the third quarter as leisure travelers responded to attractive promotions and great values in our hotels. With solid cost controls, our hotels translated better than expected occupancy rates to stronger than expected fee revenue and earnings.
"The hotel industry has been challenged by the economic environment. We've worked hard to rein in costs and right-size our businesses and those efforts are paying off. Our hotels are in great shape; owners and customers prefer our brands; and we enjoy very strong market share premiums. As we look ahead, while the recovery may be slow and perhaps uneven, our continued focus on driving revenue, controlling costs and strengthening our balance sheet will position us to benefit from an improving economy."
In the 2009 third quarter (12-week period from June 20, 2009 to September 11, 2009), REVPAR for the company's worldwide comparable company-operated properties declined 23.5 percent (21.1 percent using constant dollars) and REVPAR for the company's worldwide comparable systemwide properties declined 21.4 percent (19.9 percent using constant dollars).
Markets outside North America were impacted by the difficult economic climate, the Olympics, the timing of holidays and concerns about the H1N1 virus. International comparable company-operated REVPAR declined 28.9 percent (22.3 percent using constant dollars), including a 22.7 percent decline in average daily rate (15.5 percent using constant dollars) in the third quarter of 2009.
In North America comparable company-operated REVPAR declined 20.6 percent and comparable systemwide REVPAR declined 19.3 percent. REVPAR at the company's comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 20.2 percent driven by a 14.6 percent decline in average daily rate.
Marriott added 79 new properties (10,380 rooms) to its worldwide lodging portfolio in the 2009 third quarter, including over 8,600 North American limited-service rooms. Three properties (503 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed 3,362 properties and timeshare resorts for a total of over 586,000 rooms. As of the end of the third quarter, the company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled approximately 105,000 rooms. The company expects to open over 33,000 rooms in 2009.
Reported results for the 2009 third quarter, the adjusted results and the associated reconciliations are shown on pages A-1, A-11, A-13, A-14 and A-17 of the accompanying schedules. The following paragraphs reflect adjusted results where indicated.
MARRIOTT REVENUES totaled approximately $2.5 billion in the 2009 third quarter compared to $3.0 billion for the third quarter of 2008. Base management and franchise fees declined 14 percent to $216million reflecting worldwide declines in REVPAR in all brands offset in part by fees from new hotels. With continued soft lodging demand trends worldwide, third quarter incentive management fees declined 67 percent. The percentage of company-operated hotels earning incentive management fees declined to 20 percent in the 2009 third quarter compared to 55 percent in the year-ago quarter. Year-to-date 25 percent of company-operated hotels earned incentive management fees compared to 62 percent in the prior year. Nearly all incentive management fees came from hotels outside of North America in the 2009 quarter compared to 68 percent in the 2008 quarter.
Worldwide comparable company-operated house profit margins declined 490 basis points in the third quarter reflecting weak REVPAR offset by continued efficiency improvements at the property level. House profit margins for comparable company-operated properties outside North America declined 430 basis points. North American comparable company-operated house profit margins declined 520 basis points from the year-ago quarter.
Owned, leased, corporate housing and other revenue, net of direct expenses, declined $8 million in the 2009 third quarter, to $12 million, primarily reflecting weaker operating results at owned and leased properties and lower corporate housing profits partially offset by a $6 million transaction cancellation fee.
Third quarter adjusted Timeshare segment contract sales declined 42 percent to $176 million excluding a $24 million allowance for fractional and residential contract cancellations recorded in the quarter. Contract sales of core one-week timeshare intervals totaled $164 million as marketing incentives encouraged demand.
In the third quarter of 2009, adjusted Timeshare sales and services revenue declined 35 percent to $251 million and, net of expenses, declined to $13 million from $47 million in the 2008 third quarter. Adjusted results reflected lower development profit due to continued soft demand for timeshare, fractional, and residential products, and unfavorable reportability. Services profit was also lower largely due to higher maintenance costs associated with unsold inventory and lower rental rates.
Adjusted Timeshare segment results, which includes Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, noncontrolling interest and general, administrative and other expenses associated with the timeshare business, totaled $9 million in the 2009 third quarter compared to $49 million in the prior year quarter. The 2008 third quarter segment results reflected a net $10 million pretax impairment charge for a fractional and residential consolidated joint venture project. The $10 million charge in 2008 included a $22 million negative adjustment in timeshare direct expenses partially offset by a $12 million pretax ($8 million after-tax) benefit associated with the joint venture partner's share, which is reflected in net losses attributable to noncontrolling interest, net of tax.
ADJUSTED GENERAL, ADMINISTRATIVE AND OTHER expenses for the 2009 third quarter totaled $143 million, a 14 percent decline from the year-ago quarter largely reflecting cost reductions throughout the organization. The quarter also included a $15 million unfavorable impact associated with deferred compensation compared to the 2008 quarter (offset by a similar decrease in the provision for taxes) and $5 million of certain litigation expenses. Excluding these items, general, administrative and other expenses for the third quarter of 2009 declined 25 percent compared to the third quarter of 2008.
(LOSSES) GAINS AND OTHER INCOME totaled a loss of $1 million and included a $5 million impairment charge on an investment partially offset by $3 million of gains on the sale of real estate and a $1 million gain on the extinguishment of debt. The prior year's third quarter gains totaled $7 million and included $2 million of gains on the sale of real estate, a $2 million gain from the sale of the company's interest in a joint venture and $3 million of returns from joint venture investments.
INTEREST EXPENSE decreased $6 million in the third quarter primarily due to lower interest rates on short-term borrowings and lower debt balances partially offset by lower capitalized interest associated with construction projects.
ADJUSTED EQUITY IN (LOSSES) EARNINGS totaled an $11 million loss in the quarter compared to $2 million in earnings in the year-ago quarter. Losses in the 2009 quarter primarily reflected losses in four joint ventures and the impairment of one investment.
NET LOSSES ATTRIBUTABLE TO NONCONTROLLING INTERESTS, NET OF TAX totaled $3 million in the quarter compared to $10 million in the year-ago quarter.
BALANCE SHEET
At the end of third quarter 2009, total debt was $2,660 million and cash balances totaled $130 million, compared to $3,095 million of debt and $134 million of cash at year-end 2008.
COMMON STOCK
Adjusted weighted average fully diluted shares outstanding totaled 366.3 million in the 2009 third quarter compared to 368.0 million in the year-ago quarter. The remaining share repurchase authorization, as of September 11, 2009, totaled 21.3 million shares. No share repurchases are planned in 2009.
On August 6, 2009, the Board of Directors declared the issuance of a stock dividend payable on September 3, 2009, to shareholders of record on August 20, 2009. For periods prior to the stock dividend, all share and per share data in our condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the stock dividend.
FOURTH QUARTER 2009 OUTLOOK
While Marriott typically provides a range of guidance for future performance, the current global economic and financial climate continues to make predictions very difficult. Therefore, the company is unable to give its typical guidance. Instead, the company is providing the following assumptions which it is using for internal planning purposes. For the fourth quarter, the company assumes North American comparable systemwide hotel REVPAR declines of 13 to 16 percent. For comparable systemwide hotels outside North America, the company assumes REVPAR declines of 16 to 18 percent on a constant dollar basis. Total fee revenue could be $310 million to $320 million. Owned, leased, corporate housing and other revenue, net of direct expenses, could total $15 to $20 million.
In the fourth quarter, the company assumes Timeshare sales and services revenue, net of direct expenses, will total approximately $15 million, including a note sale gain of approximately $10 million to $15 million. Fourth quarter Timeshare contract sales could total $185 million to $195 million.
The company anticipates that general, administrative and other expenses will total about $185 million to $190 million in the fourth quarter of 2009, a roughly 20 percent decline from the adjusted 2008 fourth quarter amount.
Based upon the above assumptions and a 38 percent tax rate, adjusted diluted EPS from continuing operations attributable to Marriott shareholders for the 2009 fourth quarter could total $0.20 to $0.23.
The company expects investment spending in 2009 will decline by more than 50 percent from 2008 levels to approximately $325 million to $375 million. This investment spending estimate includes $145 million to $155 million for capital expenditures and maintenance capital spending, $20 million to $30 million for net timeshare development, $90 million to $100 million in new mezzanine financing and mortgage loans, $35 million to $45 million for contract acquisition costs and $35 million to $45 million in equity and other investments (including timeshare equity investments).
2010 OUTLOOK
As in 2009, the company is unable to provide its typical guidance for 2010. Instead, Marriott is providing the following assumptions, which it is using for internal planning purposes. For the full year 2010, the company expects the business climate, particularly the pricing environment, to remain difficult. For worldwide comparable systemwide hotels, the company assumes full year 2010 REVPAR will be flat to down 5 percent (on a constant dollar basis) with performance strengthening over the year. The company expects REVPAR in international markets to show greater relative year over year strength than North American markets.
The company expects to open 25,000 to 30,000 rooms in 2010 as most hotels expected to open are already under construction or undergoing conversion from other brands. Given these assumptions, full year 2010 fee revenue could total $1,050 million to $1,110 million. The company estimates that, on a full-year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $10 million to $15 million pretax.
For its timeshare business, the company assumes 2010 timeshare contract sales could be in line with 2009 levels.
The company expects to adopt FAS 166 and 167 at the beginning of 2010, which will impact its accounting for securitized timeshare loans. Assuming the consolidation of the existing portfolio of securitized loans, the company expects assets to increase by $950 million to $1,025 million, liabilities to increase by $1,020 million to $1,120 million, and shareholders' equity to decline by $70 million to $95 million. Pretax earnings in 2010 would increase by $30 million to $50 million as a result of the accounting change, but no change in cash flow is anticipated.
The company expects its 2010 general and administrative costs to be modestly higher than in 2009. As part of its ongoing budget process, the company continues to evaluate its timeshare earnings outlook and investment spending estimates for 2010. Based on its preliminary outlook for 2010, excluding the impact of FAS 166 and 167, the company anticipates continued meaningful reductions in debt levels in 2010.
Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, October 8, 2009 at 10 a.m. Eastern Time (ET). The conference call will be webcast simultaneously via Marriott's investor relations website at http://www.marriott.com/investor, click the "Recent and Upcoming Events" tab and click on the quarterly conference call link. A replay will be available at that same website until October 8, 2010. The webcast will also be available as a podcast from the same site.
The telephone dial-in number for the conference call is 719-325-4808. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, October 8, 2009 until 8 p.m. ET, Thursday, October 15, 2009. To access the replay, call 719-457-0820. The reservation number for the recording is 5860348.
Note: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends, estimates and assumptions; statements concerning the number of lodging properties we expect to add in the future; our expected cost savings, investment spending and share repurchases; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the depth and duration of the current recession; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors identified in our most recent quarterly report on Form 10-Q; any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
MARRIOTT INTERNATIONAL, INC. (NYSE:MAR) is a leading lodging company with more than 3,300 lodging properties in 68 countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its MarriottExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA and had approximately 146,000 employees at 2008 year-end. It is recognized by BusinessWeek as one of the 100 best global brands, by FORTUNE(R) as one of the best companies to work for, and by the U.S. Environmental Protection Agency (EPA) as Partner of the Year since 2004. In fiscal year 2008, Marriott International reported sales from continuing operations of nearly $13 billion. For more information or reservations, please visit our web site at www.marriott.com. For an interactive online version of Marriott's 2008 Annual Report, which includes a short video message from Chairman and CEO J.W. Marriott, Jr., visit www.marriott.com/investor.
IRPR#1
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Adjustments
-----------
As
Reported Restruc- As Adjusted
12 Weeks turing Timeshare 12 Weeks
Ended Costs Strategy - Ended
September & Other Impairment Certain September
11, 2009 Charges(6) Charges(5,10) Tax Items 11, 2009**
REVENUES
Base management
fees $116 $- $- $- $116
Franchise fees 100 - - - 100
Incentive
management fees 17 - - - 17
Owned, leased,
corporate housing
and other revenue
(1) 226 - - - 226
Timeshare
sales and
services (2) 254 (3) - - 251
Cost
reimbursements
(3) 1,758 - - - 1,758
----- - - - -----
Total Revenues 2,471 (3) - - 2,468
OPERATING COSTS
AND EXPENSES
Owned, leased
and corporate
housing - direct
(4) 214 - - - 214
Timeshare - direct 238 - - - 238
Timeshare
strategy -
impairment
charges (5) 614 - (614) - -
Reimbursed costs 1,758 - - - 1,758
Restructuring
costs 9 (9) - - -
General,
administrative
and other (7) 144 (1) - - 143
--- -- - - ---
Total Expenses 2,977 (10) (614) - 2,353
----- ---- ---- - -----
OPERATING (LOSS) /
INCOME (506) 7 614 - 115
(Losses) /
gains and other
income (8) (1) - - - (1)
Interest expense (27) - - - (27)
Interest income 5 - - - 5
(Provision for)
reversal of loan
losses - - - - -
Equity in
(losses) earnings
(9) (12) 1 - - (11)
Timeshare
strategy -
impairment
charges
(non-operating)
(10) (138) - 138 - -
----- - --- - -
(LOSS) / INCOME
FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES (679) 8 752 - 81
Benefit /
(Provision) for
income taxes 210 (4) (250) 13 (31)
--- -- ---- -- ---
(LOSS) / INCOME
FROM CONTINUING
OPERATIONS (469) 4 502 13 50
Discontinued
operations -
Synthetic Fuel,
net of tax (11) - - - - -
- - - - -
NET (LOSS) /
INCOME (469) 4 502 13 50
Add: Net losses
attributable to
noncontrolling
interests, net of
tax 3 - - - 3
- - - - -
NET (LOSS) /
INCOME
ATTRIBUTABLE TO
MARRIOTT $(466) $4 $502 $13 $53
===== == ==== === ===
(LOSSES) /
EARNINGS PER
SHARE - Basic
(Losses) /
earnings from
continuing
operations
attributable to
Marriott
shareholders (12) $(1.31) $0.01 $1.41 $0.03 $0.15
Earnings
from discontinued
operations (11) - - - - -
- - - - -
(Losses) /
earnings per
share
attributable to
Marriott
shareholders (12) $(1.31) $0.01 $1.41 $0.03 $0.15
====== ===== ===== ===== =====
(LOSSES) /
EARNINGS PER
SHARE - Diluted
(Losses) /
earnings from
continuing
operations
attributable to
Marriott
shareholders (12) $(1.31) $0.01 $1.41 $0.03 $0.15
Earnings
from discontinued
operations (11) - - - - -
- - - - -
(Losses) /
earnings per
share
attributable to
Marriott
shareholders (12) $(1.31) $0.01 $1.41 $0.03 $0.15
====== ===== ===== ===== =====
Basic Shares
(13) 355.5 355.5 355.5 355.5 355.5
Diluted Shares
(13,14) 355.5 355.5 355.5 355.5 366.3
Adjustments
As Reported As Adjusted Percent
12 Weeks 12 Weeks Better/(Worse)
Ended Ended Adjusted 2009
September Certain September vs. Adjusted
5, 2008 Tax Items 5, 2008** 2008
REVENUES
Base management fees $143 $- $143 (19)
Franchise fees 108 - 108 (7)
Incentive management fees 52 - 52 (67)
Owned, leased, corporate
housing and other revenue (1) 260 - 260 (13)
Timeshare sales and
services (2) 384 - 384 (35)
Cost reimbursements (3) 2,016 - 2,016 (13)
Total Revenues 2,963 - 2,963 (17)
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing - direct (4) 240 - 240 11
Timeshare - direct 337 - 337 29
Timeshare strategy -
impairment charges (5) - - - -
Reimbursed costs 2,016 - 2,016 13
Restructuring costs - - - -
General, administrative and
other (7) 167 - 167 14
Total Expenses 2,760 - 2,760 15
OPERATING (LOSS) / INCOME 203 - 203 (43)
(Losses) / gains and other
income (8) 7 - 7 (114)
Interest expense (33) - (33) 18
Interest income 8 - 8 (38)
(Provision for) reversal of
loan losses - - - -
Equity in (losses) earnings (9) 2 - 2 (650)
Timeshare strategy -
impairment charges
(non-operating) (10) - - - -
(LOSS) / INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 187 - 187 (57)
Benefit / (Provision) for
income taxes (103) 29 (74) 58
(LOSS) / INCOME FROM CONTINUING
OPERATIONS 84 29 113 (56)
Discontinued operations -
Synthetic Fuel, net of tax
(11) - - - -
NET (LOSS) / INCOME 84 29 113 (56)
Add: Net losses attributable to
noncontrolling interests, net
of tax 10 - 10 (70)
NET (LOSS) / INCOME
ATTRIBUTABLE TO MARRIOTT $94 $29 $123 (57)
(LOSSES) / EARNINGS PER SHARE -
Basic
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $0.27 $0.08 $0.35 (57)
Earnings from
discontinued operations (11) - - - -
(Losses) / earnings per
share attributable to Marriott
shareholders (12) $0.27 $0.08 $0.35 (57)
(LOSSES) / EARNINGS PER SHARE -
Diluted
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $0.25 $0.08 $0.33 (55)
Earnings from
discontinued operations (11) - - - -
(Losses) / earnings per
share attributable to Marriott
shareholders (12) $0.25 $0.08 $0.33 (55)
Basic Shares (13) 353.8 353.8 353.8
Diluted Shares (13,14) 368.0 368.0 368.0
See page A-3 for footnote
references.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Adjustments
As Adjusted
As Reported Restruct- Time- 36 Weeks
36 Weeks uring share Ended
Ended Costs Strategy - Certain September
September & Other Impairment Tax 11,
11, 2009 Charges(6) Charges(5,10) Items 2009**
REVENUES
Base management fees $367 $- $- $- $367
Franchise fees 281 - - - 281
Incentive management fees 95 - - - 95
Owned, leased, corporate
housing and other
revenue (1) 684 - - - 684
Timeshare sales and
services (2) 746 26 - - 772
Cost reimbursements (3) 5,355 - - - 5,355
Total Revenues 7,528 26 - - 7,554
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing - direct( 4) 638 - - - 638
Timeshare - direct 737 1 - - 738
Timeshare strategy -
impairment charges (5) 614 - (614) - -
Reimbursed costs 5,355 - - - 5,355
Restructuring costs 44 (44) - - -
General, administrative and
other (7) 464 (49) - - 415
Total Expenses 7,852 (92) (614) - 7,146
OPERATING (LOSS) / INCOME (324) 118 614 - 408
Gains and other income (8) 27 - - - 27
Interest expense (84) - - - (84)
Interest income 20 - - - 20
(Provision for) reversal of loan
losses (43) 43 - - -
Equity in (losses)
earnings (9) (50) 33 - - (17)
Timeshare strategy - impairment
charges (non-operating) (10) (138) - 138 - -
(LOSS) / INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES (592) 194 752 - 354
Benefit / (Provision) for income
taxes 133 (76) (250) 56 (137)
(LOSS) / INCOME FROM CONTINUING
OPERATIONS (459) 118 502 56 217
Discontinued operations -
Synthetic Fuel, net of tax (11) - - - - -
NET (LOSS) / INCOME (459) 118 502 56 217
Add: Net losses attributable to
noncontrolling interests, net of
tax 7 - - - 7
NET (LOSS) / INCOME ATTRIBUTABLE TO
MARRIOTT $(452) $118 $502 $56 $224
(LOSSES) / EARNINGS PER SHARE -
Basic
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $(1.27) $0.33 $1.42 $0.16 $0.63
Earnings from discontinued
operations (11) - - - - -
(Losses) / earnings per
share attributable to
Marriott
shareholders (12) $(1.27) $0.33 $1.42 $0.16 $0.63
(LOSSES) / EARNINGS PER SHARE -
Diluted
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $(1.27) $0.33 $1.42 $0.16 $0.62
Earnings from
discontinued
operations (11) - - - - -
(Losses) / earnings per
share attributable to
Marriott
shareholders (12) $(1.27) $0.33 $1.42 $0.16 $0.62
Basic Shares (13) 354.5 354.5 354.5 354.5 354.5
Diluted Shares (13,14) 354.5 354.5 354.5 354.5 364.2
Adjustments
As Reported As Adjusted Percent
36 Weeks 36 Weeks Better/(Worse)
Ended Ended Adjusted 2009
September Certain September vs. Adjusted
5, 2008 Tax Items 5, 2008** 2008
REVENUES
Base management fees $452 $- $452 (19)
Franchise fees 314 - 314 (11)
Incentive management fees 229 - 229 (59)
Owned, leased, corporate
housing and other revenue (1) 849 - 849 (19)
Timeshare sales and services (2) 1,098 - 1,098 (30)
Cost reimbursements (3) 6,153 - 6,153 (13)
----- - -----
Total Revenues 9,095 - 9,095 (17)
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing - direct( 4) 757 - 757 16
Timeshare - direct 961 - 961 23
Timeshare strategy -
impairment charges (5) - - - -
Reimbursed costs 6,153 - 6,153 13
Restructuring costs - - - -
General, administrative and
other (7) 513 - 513 19
--- - ---
Total Expenses 8,384 - 8,384 15
----- - -----
OPERATING (LOSS) / INCOME 711 - 711 (43)
Gains and other income (8) 19 - 19 42
Interest expense (113) - (113) 26
Interest income 28 - 28 (29)
(Provision for) reversal of loan
losses 2 - 2 (100)
Equity in (losses) earnings (9) 26 - 26 (165)
Timeshare strategy -
impairment charges
(non-operating) (10) - - - -
- - -
(LOSS) / INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 673 - 673 (47)
Benefit / (Provision) for income
taxes (317) 65 (252) 46
---- -- ----
(LOSS) / INCOME FROM CONTINUING
OPERATIONS 356 65 421 (48)
Discontinued operations -
Synthetic Fuel, net of tax (11) 3 - 3 (100)
- - -
NET (LOSS) / INCOME 359 65 424 (49)
Add: Net losses attributable to
noncontrolling interests, net of
tax 13 - 13 (46)
-- - --
NET (LOSS) / INCOME ATTRIBUTABLE
TO MARRIOTT $372 $65 $437 (49)
==== === ====
(LOSSES) / EARNINGS PER SHARE -
Basic
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $1.04 $0.18 $1.22 (48)
Earnings from discontinued
operations (11) 0.01 - 0.01 (100)
---- - ----
(Losses) / earnings per
share attributable to Marriott
shareholders (12) $1.05 $0.18 $1.23 (49)
===== ===== =====
(LOSSES) / EARNINGS PER SHARE -
Diluted
(Losses) / earnings from
continuing operations
attributable to Marriott
shareholders (12) $0.99 $0.17 $1.16 (47)
Earnings from discontinued
operations (11) 0.01 - 0.01 (100)
---- - ----
(Losses) / earnings per
share attributable to Marriott
shareholders (12) $1.00 $0.17 $1.17 (47)
===== ===== =====
Basic Shares (13) 355.6 355.6 355.6
Diluted Shares (13,14) 372.0 372.0 372.0
See page A-3 for footnote
references.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Reconciliations of Consolidated (Loss) / Income from Continuing Operations
to (Loss) / Income from Continuing Operations Attributable to Marriott
Adjustments
-----------
As Reported As Adjusted
12 Weeks Restruc- 12 Weeks
Ended turing Timeshare Ended
September Costs Strategy - Certain September
11, & Other Impairment Tax 11,
2009 Charges(6) Charges(5)(10) Items 2009**
CONSOLIDATED (LOSS) /
INCOME FROM CONTINUING
OPERATIONS $(469) $4 $502 $13 $50
Add: Losses attributable
to noncontrolling
interests, net of tax 3 - - - 3
- - - - -
(LOSS) / INCOME FROM
CONTINUING OPERATIONS
ATTRIBUTABLE TO
MARRIOTT $(466) $4 $502 $13 $53
===== == ==== === ===
Adjustments
-----------
As Reported Restruc- As Adjusted
36 Weeks turing Timeshare 36 Weeks
Ended Costs Strategy - Ended
September & Other Impairment Certain September
11, Charges Charges Tax 11,
2009 (6) (5),(10) Items 2009**
CONSOLIDATED (LOSS) /
INCOME FROM CONTINUING
OPERATIONS $(459) $118 $502 $56 $217
Add: Losses attributable to
noncontrolling interests,
net of tax 7 - - - 7
- - - - -
(LOSS) / INCOME FROM
CONTINUING OPERATIONS
ATTRIBUTABLE TO
MARRIOTT $(452) $118 $502 $56 $224
===== ==== ==== === ====
Adjustments
-----------
Percent
Better/
As Reported (Worse)
12 Weeks As Adjusted Adjusted
Ended 12 Weeks 2009 vs.
September Certain Ended Adjusted
5, 2008 Tax Items September 5, 2008** 2008
----------- --------- ------------------- ---------
CONSOLIDATED (LOSS) /
INCOME FROM CONTINUING
OPERATIONS $84 $29 $113 (56)
Add: Losses attributable to
noncontrolling interests,
net of tax 10 - 10 (70)
-- - --
(LOSS) / INCOME FROM
CONTINUING OPERATIONS
ATTRIBUTABLE TO MARRIOTT $94 $29 $123 (57)
=== === ====
Adjustments
-----------
Percent
Better/
As Reported (Worse)
36 Weeks As Adjusted Adjusted
Ended 36 Weeks 2009 vs.
September Certain Ended Adjusted
5, 2008 Tax Items September 5, 2008** 2008
----------- --------- ------------------- ---------
CONSOLIDATED (LOSS) /
INCOME FROM CONTINUING
OPERATIONS $356 $65 $421 (48)
Add: Losses attributable to
noncontrolling interests,
net of tax 13 - 13 (46)
-- - --
(LOSS) / INCOME FROM
CONTINUING OPERATIONS
ATTRIBUTABLE TO MARRIOTT $369 $65 $434 (48)
==== === ====
** Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
1 - Owned, leased, corporate housing and other revenue includes
revenue from the properties we own or lease, revenue from our corporate
housing business, termination fees and other revenue.
2 - Timeshare sales and services includes total timeshare revenue
except for base management fees, cost reimbursements, real estate gains
and joint venture earnings. Timeshare sales and services also includes
gains / (losses) on the sale of timeshare note receivable
securitizations.
3 - Cost reimbursements include reimbursements from lodging properties
for Marriott-funded operating expenses.
4 - Owned, leased and corporate housing - direct expenses include
operating expenses related to our owned or leased hotels, including lease
payments, pre-opening expenses and depreciation, plus expenses related to
our corporate housing business.
5 - Reflects the following impairments; inventory $529 million,
property and equipment $64 million; and other impairments $21 million, all
of which are allocated to the Timeshare segment. See page A-14 for
information regarding Timeshare Strategy - Impairment Charges.
6 - See page A-13 for information regarding Restructuring Costs and
Other Charges.
7 - General, administrative and other expenses include the overhead
costs allocated to our segments, and our corporate overhead costs and
general expenses.
8 - Gains and other income includes gains and losses on: the sale of
real estate, note sales or repayments (except timeshare note
securitizations), the sale of joint ventures and investments; and debt
extinguishments, as well as income from cost method joint ventures.
9 - Equity in (losses) earnings includes our equity in (losses) /
earnings of unconsolidated equity method joint ventures.
10 - Reflects a $71 million joint venture impairment charge which is
allocated to the Timeshare segment and $67 million loan impairment and
funding liability charge which is unallocated. See page A-14 for
information regarding Timeshare Strategy - Impairment Charges.
11 - Discontinued operations relates to our Synthetic Fuel business which
was shut down and substantially all the assets liquidated at December 28,
2007.
12 - (Losses) / earnings per share attributable to Marriott
shareholders plus adjustment items may not equal earnings per share
attributable to Marriott shareholders as adjusted due to rounding.
13 - All share numbers and per share amounts have been retroactively
adjusted to reflect the stock dividends with distribution dates of July
30, 2009 and September 3, 2009.
14 - Basic and fully diluted weighted average common shares outstanding
used to calculate earnings per share from continuing operations for the
periods in which we had a loss are the same because inclusion of
additional equivalents would be anti-dilutive.
MARRIOTT INTERNATIONAL, INC.
BUSINESS SEGMENTS
($ in millions)
Twelve Weeks Ended Percent
------------------
Better/
September September
11, 2009 5, 2008 (Worse)
--------- --------- ---------
REVENUES
North American Full-Service $1,074 $1,239 (13)
North American Limited-Service 489 544 (10)
International 259 342 (24)
Luxury 296 357 (17)
Timeshare 330 463 (29)
------ ------
Total segment revenues(1) 2,448 2,945 (17)
Other unallocated corporate 23 18 28
------ ------
Total $2,471 $2,963 (17)
====== ======
INCOME / (LOSS) FROM CONTINUING OPERATIONS
North American Full-Service $51 $66 (23)
North American Limited-Service 77 103 (25)
International 25 50 (50)
Luxury 7 17 (59)
Timeshare (2),(3) (681) 49 (1,490)
---- ----
Total segment financial results (1) (521) 285 (283)
Other unallocated corporate (65) (58) (12)
Interest income, provision for loan losses
and interest expense (4) (89) (25) (256)
Income taxes (2) 209 (108) 294
---- ----
Total $(466) $94 (596)
===== ====
(1) We consider segment revenues and segment financial results to be
meaningful indicators of our performance because they measure
changes in our profitability as a lodging company and enable
investors to compare the revenues and results of our
lodging operations to those of other lodging companies.
(2) We allocate noncontrolling interests of our consolidated subsidiaries
to our segments. Accordingly, we allocated $3 million
of noncontrolling interests of our consolidated subsidiaries for
the 2009 third quarter as reflected in our income statement
as follows: $4 million to our Timeshare segment and $(1) million to
provision for income taxes. For the 2008 third quarter,
we allocated $10 million of noncontrolling interests as follows: $15
million to our Timeshare segment
and $(5) million to provision for income taxes.
(3) Reflects $685 million of impairment charges recorded in the 2009
third quarter. See page A-14 for more information.
(4) Reflects a $67 million loan impairment and funding liability charge
in the 2009 third quarter which is unallocated. See page A-14 for
more information.
MARRIOTT INTERNATIONAL, INC.
BUSINESS SEGMENTS
($ in millions)
Thirty-Six Weeks Ended Percent
----------------------
Better/
September September
11, 2009 5, 2008 (Worse)
--------- --------- -------
REVENUES
North American Full-Service $3,382 $3,917 (14)
North American Limited-Service 1,401 1,570 (11)
International 756 1,093 (31)
Luxury 971 1,147 (15)
Timeshare 962 1,326 (27)
----- -----
Total segment revenues (1) 7,472 9,053 (17)
Other unallocated corporate 56 42 33
----- ------
Total $7,528 $9,095 (17)
====== ======
INCOME / (LOSS) FROM CONTINUING OPERATIONS
North American Full-Service $191 $290 (34)
North American Limited-Service 182 301 (40)
International (2) 89 179 (50)
Luxury - 66 (100)
Timeshare (2),(3) (733) 123 (696)
----- ----
Total segment financial
results (1) (271) 959 (128)
Other unallocated corporate (136) (183) 26
Interest income, provision for loan losses
and interest expense (4) (174) (83) (110)
Income taxes (2) 129 (324) 140
--- ----
Total $(452) $369 (222)
===== ====
(1) We consider segment revenues and segment financial results to be
meaningful indicators of our performance because they measure
changes in our profitability as a lodging company and enable
investors to compare the revenues and results of our lodging
operations to those of other lodging companies.
(2) We allocate noncontrolling interests of our consolidated
subsidiaries to our segments. Accordingly, we allocated $7
million of noncontrolling interests of our consolidated
subsidiaries for the 2009 third quarter year-to-date as reflected
in our income statement as follows: $11 million to our Timeshare
segment and $(4) million to provision for income taxes. For the
2008 third quarter year-to-date, we allocated $13 million of
noncontrolling interests as follows: $21 million to our Timeshare
segment, $(1) million to our International segment, and $(7)
million to provision for income taxes.
(3) Reflects $685 million of impairment charges recorded in the 2009
third quarter. See page A-14 for more information.
(4) Reflects a $67 million loan impairment and funding liability
charge in the 2009 third quarter which is unallocated. See page
A-14 for more information.
MARRIOTT INTERNATIONAL, INC.
TOTAL LODGING PRODUCTS (1)
Number of Properties Number of Rooms/Suites
--------------------------------------------------
September September
-------------------- --------------------
Brand 11, 5, 5, 11, 5, 5,
2009 2008 2008 2009 2008 2008
Domestic Full-Service
---------------------
Marriott Hotels & Resorts 350 345 5 139,280 137,498 1,782
Renaissance Hotels &
Resorts 78 75 3 28,508 27,546 962
Domestic Limited-Service
------------------------
Courtyard 761 715 46 106,835 99,676 7,159
Fairfield Inn 609 547 62 54,537 48,542 5,995
SpringHill Suites 241 198 43 27,818 23,057 4,761
Residence Inn 583 541 42 69,865 64,552 5,313
TownePlace Suites 179 154 25 17,917 15,403 2,514
International
-------------
Marriott Hotels & Resorts 188 179 9 57,010 53,805 3,205
Renaissance Hotels &
Resorts 65 65 - 22,291 21,684 607
Courtyard 88 78 10 17,254 14,708 2,546
Fairfield Inn 9 9 - 1,109 1,109 -
SpringHill Suites 1 1 - 124 124 -
Residence Inn 18 18 - 2,604 2,665 (61)
Marriott Executive
Apartments 22 19 3 3,580 3,029 551
Luxury
------
The Ritz-Carlton
- Domestic 37 37 - 11,549 11,603 (54)
The Ritz-Carlton -
International 33 33 - 10,117 10,171 (54)
Bulgari Hotels & Resorts 2 2 - 117 117 -
The Ritz-Carlton
Residential 25 21 4 2,638 2,122 516
The Ritz-Carlton Serviced
Apartments 3 2 1 474 387 87
Timeshare (2)
-----------
Marriott Vacation
Club(3) 52 51 1 11,854 11,772 82
The Ritz-Carlton
Destination Club 10 9 1 461 425 36
The Ritz-Carlton
Residences 4 3 1 234 145 89
Grand Residences by
Marriott - Fractional 2 2 - 248 248 -
Grand Residences by
Marriott - Residential 2 1 1 91 65 26
--- --- --- --- --- ---
Sub Total Timeshare 70 66 4 12,888 12,655 233
--- --- --- --- --- ---
Total 3,362 3,105 257 586,515 550,453 36,062
===== ===== === ======= ======= ======
Number of Timeshare Interval, Fractional and
Residential Resorts
--------------------------------------------
Total Properties in
Properties(2) Active Sales(4)
---------- --------------
100% Company-Developed
----------------------
Marriott Vacation Club(3) 52 29
The Ritz-Carlton Destination Club and
Residences 10 8
Grand Residences by Marriott and
Residences 4 4
Joint Ventures
--------------
The Ritz-Carlton Destination Club and
Residences 4 4
- -
Total 70 45
== ==
(1) Total Lodging Products excludes the 2,153 and 2,314 corporate housing
rental units as of September 11, 2009 and September 5, 2008,
respectively.
(2) Includes products that are in active sales as well as those that are
sold out. Residential products are included once they possess a
certificate of occupancy.
(3) Marriott Vacation Club includes Horizons by Marriott Vacation Club
products that were previously reported separately.
(4) Products in active sales may not be ready for occupancy.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Constant $
Comparable Company-Operated International Properties(1)
-----------------------------------------------------
Three Months Ended August 31, 2009
and August 31, 2008
------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Region 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
------ ------------- ---------------- --------------
Caribbean & Latin
America $105.28 -23.9% 66.3% -9.1% pts. $158.84 -13.5%
Continental Europe $109.13 -18.4% 71.0% -2.1% pts. $153.72 -16.0%
United Kingdom $111.78 -12.3% 77.3% -2.7% pts. $144.66 -9.1%
Middle East & Africa $74.52 -27.8% 61.6% -13.8% pts. $121.06 -11.7%
Asia Pacific(2) $74.55 -29.6% 62.6% -6.1% pts. $119.16 -22.7%
Regional Composite(3) $97.11 -21.4% 68.3% -5.4% pts. $142.25 -15.2%
International Luxury(4) $155.56 -26.7% 55.0% -9.7% pts. $282.69 -13.7%
Total International(5) $103.26 -22.3% 66.9% -5.8% pts. $154.40 -15.5%
Worldwide(6) $94.06 -21.1% 68.1% -5.4% pts. $138.03 -14.9%
Comparable Systemwide International Properties(1)
-------------------------------------------------
-----------------------------------------------------
Three Months Ended August 31, 2009
and August 31, 2008
------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Region 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
------ ------------- ---------------- --------------
Caribbean & Latin
America $90.76 -24.5% 62.4% -9.5% pts. $145.41 -13.1%
Continental Europe $108.55 -20.3% 69.4% -3.4% pts. $156.47 -16.3%
United Kingdom $109.26 -12.5% 76.2% -2.8% pts. $143.41 -9.3%
Middle East & Africa $74.52 -27.8% 61.6% -13.8% pts. $121.06 -11.7%
Asia Pacific(2) $82.39 -25.0% 63.1% -6.7% pts. $130.53 -17.0%
Regional Composite(3) $96.60 -21.4% 67.0% -6.0% pts. $144.17 -14.4%
International Luxury(4) $155.56 -26.7% 55.0% -9.7% pts. $282.69 -13.7%
Total International(5) $101.66 -22.1% 66.0% -6.3% pts. $154.10 -14.7%
Worldwide(6) $83.79 -19.9% 68.0% -5.7% pts. $123.15 -13.2%
(1) We report International results on a period basis, and international
statistics on a monthly basis. Statistics are in constant dollars
for June through August. International includes properties located
outside the Continental United States and Canada, except for
Worldwide which also includes North America.
(2) Does not include Hawaii.
(3) Regional information includes the Marriott Hotels & Resorts,
Renaissance Hotels & Resorts and Courtyard brands.
Includes Hawaii.
(4) International Luxury includes The Ritz-Carlton properties outside
of North America and Bulgari Hotels & Resorts.
(5) Includes Regional Composite and International Luxury.
(6) Includes international statistics for the three calendar months
ended August 31, 2009 and August 31, 2008, and North
American statistics for the twelve weeks ended September 11, 2009
and September 5, 2008. Includes the Marriott Hotels & Resorts,
Renaissance Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels &
Resorts, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites
and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Constant $
Comparable Company-Operated International Properties(1)
-----------------------------------------------------
Eight Months Ended August 31, 2009
and August 31, 2008
------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Region 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
------ ------------- ---------------- --------------
Caribbean & Latin
America $121.87 -21.3% 67.6% -9.8% pts. $180.31 -9.9%
Continental Europe $101.15 -18.7% 65.0% -5.2% pts. $155.57 -12.2%
United Kingdom $96.91 -14.0% 71.6% -4.4% pts. $135.44 -8.6%
Middle East & Africa $92.22 -21.3% 67.0% -12.5% pts.$137.69 -6.7%
Asia Pacific(2) $74.93 -27.2% 60.5% -9.2% pts. $123.94 -16.1%
Regional Composite(3) $96.58 -20.3% 65.7% -7.3% pts. $146.92 -11.5%
International Luxury(4) $177.03 -24.1% 56.2% -10.3% pts.$314.73 -10.2%
Total International(5) $105.04 -21.0% 64.7% -7.6% pts. $162.25 -11.7%
Worldwide(6) $96.54 -20.9% 65.3% -7.0% pts. $147.82 -12.4%
Comparable Systemwide International Properties(1)
-----------------------------------------------------
Eight Months Ended August 31, 2009
and August 31, 2008
------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Region 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
------ ------------- ---------------- --------------
Caribbean & Latin
America $104.49 -21.4% 63.4% -9.1% pts. $164.74 -10.1%
Continental Europe $99.59 -19.6% 63.2% -6.1% pts. $157.58 -11.9%
United Kingdom $94.59 -14.3% 70.3% -4.7% pts. $134.55 -8.6%
Middle East & Africa $92.22 -21.3% 67.0% -12.5% pts. $137.69 -6.7%
Asia Pacific(2) $81.23 -24.0% 61.5% -9.0% pts. $132.08 -13.0%
Regional Composite(3) $95.08 -20.2% 64.4% -7.5% pts. $147.73 -11.0%
International Luxury(4) $177.03 -24.1% 56.2% -10.3% pts. $314.73 -10.2%
Total International(5) $102.13 -20.8% 63.7% -7.7% pts. $160.41 -11.2%
Worldwide(6) $83.54 -19.3% 64.9% -6.5% pts. $128.81 -11.3%
(1) We report International results on a period basis, and international
statistics on a monthly basis. Statistics are in constant dollars
for January through August. International includes properties
located outside the Continental United States and Canada, except
for Worldwide which also includes North America.
(2) Does not include Hawaii.
(3) Regional information includes the Marriott Hotels & Resorts,
Renaissance Hotels & Resorts and Courtyard brands.
Includes Hawaii.
(4) International Luxury includes The Ritz-Carlton properties outside of
North America and Bulgari Hotels & Resorts.
(5) Includes Regional Composite and International Luxury.
(6) Includes international statistics for the eight calendar months ended
August 31, 2009 and August 31, 2008, and North
American statistics for the thirty-six weeks ended September 11, 2009
and September 5, 2008. Includes the Marriott Hotels
& Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Bulgari
Hotels & Resorts, Residence Inn, Courtyard, Fairfield Inn,
TownePlace Suites and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
--------------------------------------------------------
Twelve Weeks Ended September 11, 2009
and September 5, 2008
---------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Brand 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
----- ------------- --------------- --------------
Marriott Hotels
& Resorts $100.78 -19.8% 70.0% -4.9% pts. $143.98 -14.2%
Renaissance Hotels
& Resorts $93.90 -18.2% 68.0% -4.3% pts. $138.14 -13.1%
Composite North American
Full-Service(2) $99.58 -19.6% 69.6% -4.8% pts. $142.99 -14.0%
The Ritz-Carlton(3) $155.09 -23.5% 64.9% -5.0% pts. $238.99 -17.5%
Composite North American
Full-Service & Luxury(4) $105.21 -20.2% 69.2% -4.8% pts. $152.12 -14.6%
Residence Inn $83.11 -17.2% 75.2% -4.9% pts. $110.56 -11.8%
Courtyard $67.42 -23.7% 65.0% -6.1% pts. $103.75 -16.4%
TownePlace Suites $51.94 -19.0% 68.8% -4.6% pts. $75.46 -13.6%
SpringHill Suites $59.51 -22.6% 64.6% -7.8% pts. $92.11 -13.2%
Composite North American
Limited-Service(5) $70.26 -21.4% 68.0% -5.8% pts. $103.34 -14.7%
Composite - All(6) $90.28 -20.6% 68.7% -5.3% pts. $131.48 -14.5%
Comparable Systemwide North American Properties(1)
--------------------------------------------------
Twelve Weeks Ended September 11, 2009
and September 5, 2008
---------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Brand 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
----- ------------- --------------- --------------
Marriott Hotels
& Resorts $90.69 -19.9% 66.9% -5.3% pts. $135.47 -13.6%
Renaissance Hotels
& Resorts $85.97 -19.6% 66.6% -5.0% pts. $129.04 -13.5%
Composite North American
Full-Service(2) $89.90 -19.8% 66.9% -5.2% pts. $134.40 -13.6%
The Ritz-Carlton(3) $155.09 -23.5% 64.9% -5.0% pts. $238.99 -17.5%
Composite North American
Full- Service & Luxury(4) $93.82 -20.2% 66.8% -5.2% pts. $140.50 -14.0%
Residence Inn $85.72 -16.4% 76.3% -5.0% pts. $112.41 -11.0%
Courtyard $72.51 -20.2% 67.2% -5.8% pts. $107.88 -13.3%
Fairfield Inn $56.69 -17.7% 66.5% -6.7% pts. $85.21 -9.5%
TownePlace Suites $55.69 -17.6% 69.4% -5.3% pts. $80.22 -11.3%
SpringHill Suites $65.52 -18.4% 66.9% -6.4% pts. $97.97 -10.7%
Composite North American
Limited-Service(5) $71.41 -18.4% 69.5% -5.8% pts. $102.68 -11.7%
Composite - All(6) $80.16 -19.3% 68.5% -5.6% pts. $117.09 -12.7%
(1) North America includes properties located in the Continental United
States and Canada.
(2) Includes the Marriott Hotels & Resorts, and Renaissance Hotels &
Resorts brands.
(3) Statistics for The Ritz-Carlton are for June through August.
(4) Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
and The Ritz-Carlton brands.
(5) Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace
Suites and SpringHill Suites brands.
(6) Includes the Marriott Hotels & Resorts, Renaissance Hotels &
Resorts, The Ritz-Carlton, Residence Inn, Courtyard, Fairfield
Inn, TownePlace Suites, and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
--------------------------------------------------------
Thirty-six Weeks Ended September 11, 2009
and September 5, 2008
---------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Brand 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
----- ------------- --------------- --------------
Marriott Hotels
& Resorts $104.85 -19.4% 66.9% -6.1% pts. $156.81 -12.1%
Renaissance Hotels &
Resorts $102.27 -17.3% 66.2% -5.8% pts. $154.51 -10.0%
Composite North American
Full-Service(2) $104.40 -19.1% 66.7% -6.0% pts. $156.42 -11.8%
The Ritz-Carlton(3) $174.21 -27.6% 61.8% -10.3% pts.$281.86 -15.6%
Composite North American
Full-Service & Luxury(4) $110.70 -20.4% 66.3% -6.4% pts. $166.98 -12.7%
Residence Inn $81.49 -17.6% 70.5% -6.7% pts. $115.58 -9.7%
Courtyard $68.60 -23.7% 62.0% -7.5% pts. $110.72 -14.5%
TownePlace Suites $50.04 -18.9% 63.2% -6.9% pts. $79.23 -10.1%
SpringHill Suites $61.58 -22.0% 62.2% -9.1% pts. $99.05 -10.5%
Composite North American
Limited-Service(5) $70.58 -21.6% 64.5% -7.3% pts. $109.47 -12.7%
Composite - All(6) $93.44 -20.8% 65.5% -6.8% pts. $142.62 -12.6%
Comparable Systemwide North American Properties(1)
--------------------------------------------------
Thirty-six Weeks Ended September 11, 2009
and September 5, 2008
---------------------------------------------
Average
REVPAR Occupancy Daily Rate
------------- -------------- --------------
Brand 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
----- ------------- --------------- --------------
Marriott Hotels
& Resorts $93.03 -19.6% 64.1% -6.2% pts. $145.13 -11.9%
Renaissance Hotels &
Resorts $91.36 -18.0% 64.4% -6.0% pts. $141.97 -10.4%
Composite North American
Full-Service(2) $92.75 -19.4% 64.1% -6.1% pts. $144.60 -11.7%
The Ritz-Carlton(3) $174.21 -27.6% 61.8%-10.3% pts $281.86 -15.6%
Composite North American
Full-Service & Luxury(4) $97.10 -20.2% 64.0% -6.3% pts. $151.67 -12.3%
Residence Inn $82.60 -15.8% 71.8% -5.7% pts. $115.12 -9.2%
Courtyard $71.76 -19.9% 64.0% -6.3% pts. $112.08 -12.0%
Fairfield Inn $53.54 -16.6% 62.3% -6.4% pts. $85.87 -8.0%
TownePlace Suites $53.48 -16.8% 64.4% -6.7% pts. $83.08 -8.2%
SpringHill Suites $64.52 -17.1% 63.9% -6.5% pts. $101.01 -8.6%
Composite North American
Limited-Service(5) $69.49 -17.8% 65.7% -6.2% pts. $105.71 -10.1%
Composite - All(6) $80.21 -19.0% 65.1% -6.3% pts. $123.26 -11.2%
(1) North America includes properties located in the Continental United
States and Canada.
(2) Includes the Marriott Hotels & Resorts, and Renaissance Hotels &
Resorts brands.
(3) Statistics for The Ritz-Carlton are for January through August.
(4) Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
and The Ritz-Carlton brands.
(5) Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace
Suites and SpringHill Suites brands.
(6) Includes the Marriott Hotels & Resorts, Renaissance Hotels &
Resorts, The Ritz-Carlton, Residence Inn, Courtyard,
Fairfield Inn, TownePlace Suites, and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Adjustments
-----------
As
Reported Restruc-
12 Weeks turing Timeshare
Ended Costs & Strategy -
September Other Impairment
11, 2009 Charges Charges
---------------- ---------- -------- -----------
Segment Revenues
----------------
Segment revenues $330 $(3) $-
==== === ==
---------------
Segment Results
---------------
Base fees revenue $11 $- $-
Timeshare sales and services,
net 16 (3) -
Timeshare strategy - impairment
charges (614) - 614
Restructuring costs (7) 7 -
General, administrative and other
expense (17) - -
Gains and other income 1 - -
Joint venture equity earnings (4) 1 -
Timeshare strategy - impairment
charges (non-operating) (71) - 71
Noncontrolling interest 4 - -
- - -
Segment results $(681) $5 $685
===== == ====
--------------------------
Sales and Services Revenue
--------------------------
Development $138 $- $-
Services 82 - -
Financing 27 (3) -
Other revenue 7 - -
- - -
Sales and services revenue $254 $(3) $-
==== === ==
--------------
Contract Sales
--------------
Company:
Timeshare $164 $- $-
Fractional 7 - -
Residential 2 - -
- - -
Total company 173 - -
Joint ventures:
Timeshare - - -
Fractional (4) 7 -
Residential (17) 17 -
--- -- -
Total joint ventures (21) 24 -
--- -- -
Total contract sales,
including joint
ventures $152 $24 $-
==== === ==
---------------------------
(Loss) / Gain on Notes Sold
---------------------------
(Loss) / gain on notes sold $- $- $-
== == ==
Percent
As As Better /
Adjusted Reported (Worse)
12 Weeks 12 Weeks As Adjusted
Ended Ended 2009 vs.
September September 2008
11, 2009** 5, 2008 As Reported
---------------- ---------- ---------- ------------
Segment Revenues
----------------
Segment revenues $327 $463 (29)
==== ====
---------------
Segment Results
---------------
Base fees revenue $11 $12 (8)
Timeshare sales and services,
net 13 47 (72)
Timeshare strategy - impairment
charges - - -
Restructuring costs - - -
General, administrative and other
expense (17) (27) 37
Gains and other income 1 - *
Joint venture equity earnings (3) 2 (250)
Timeshare strategy - impairment
charges (non-operating) - - -
Noncontrolling interest 4 15 (73)
- --
Segment results $9 $49 (82)
== ===
--------------------------
Sales and Services Revenue
--------------------------
Development $138 $265 (48)
Services 82 81 1
Financing 24 31 (23)
Other revenue 7 7 *
- -
Sales and services revenue $251 $384 (35)
==== ====
--------------
Contract Sales
--------------
Company:
Timeshare $164 $283 (42)
Fractional 7 18 (61)
Residential 2 (6) 133
- --
Total company 173 295 (41)
Joint ventures:
Timeshare - - -
Fractional 3 6 (50)
Residential - 5 (100)
- -
Total joint ventures 3 11 (73)
- --
Total contract sales,
including joint
ventures $176 $306 (42)
==== ====
---------------------------
(Loss) / Gain on Notes Sold
---------------------------
(Loss) / gain on notes sold $- $(1) 100
== ===
*Percent cannot be calculated.
**Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Adjustments
-----------
As
Reported Restruc-
36 Weeks turing Timeshare
Ended Costs & Strategy -
September Other Impairment
11, 2009 Charges Charges
---------------- ----------- -------- -----------
Segment Revenues
----------------
Segment revenues $962 $26 $-
==== === ==
---------------
Segment Results
---------------
Base fees revenue $32 $- $-
Timeshare sales and services,
net 9 25 -
Timeshare strategy - impairment
charges (614) - 614
Restructuring costs (38) 38 -
General, administrative and other
expense (57) 7 -
Gains and other income 1 - -
Joint venture equity earnings (6) 3 -
Timeshare strategy - impairment
charges (non-operating) (71) - 71
Noncontrolling interest 11 - -
-- - -
Segment results $(733) $73 $685
===== === ====
--------------------------
Sales and Services Revenue
--------------------------
Development $441 $4 $-
Services 232 - -
Financing 54 22 -
Other revenue 19 - -
-- - -
Sales and services revenue $746 $26 $-
==== === ==
--------------
Contract Sales
--------------
Company:
Timeshare $502 $- $-
Fractional 25 1 -
Residential (1) 4 -
-- - -
Total company 526 5 -
Joint ventures:
Timeshare - - -
Fractional (9) 23 -
Residential (27) 27 -
--- -- -
Total joint ventures (36) 50 -
--- -- -
Total contract sales,
including joint
ventures $490 $55 $-
==== === ==
---------------------------
(Loss) / Gain on Notes Sold
---------------------------
(Loss) / gain on notes sold $(1) $- $-
=== == ==
Percent
Better /
As As (Worse)
Adjusted Reported As
36 Weeks 36 Weeks Adjusted
Ended Ended 2009 vs.
September September 2008 As
11, 2009** 5, 2008 Reported
---------------- ---------- ---------- ---------
Segment Revenues
----------------
Segment revenues $988 $1,326 (25)
==== ======
---------------
Segment Results
---------------
Base fees revenue $32 $35 (9)
Timeshare sales and services,
net 34 137 (75)
Timeshare strategy - impairment
charges - - -
Restructuring costs - - -
General, administrative and other
expense (50) (79) 37
Gains and other income 1 - *
Joint venture equity earnings (3) 9 (133)
Timeshare strategy - impairment
charges (non-operating) - - -
Noncontrolling interest 11 21 (48)
-- --
Segment results $25 $123 (80)
=== ====
--------------------------
Sales and Services Revenue
--------------------------
Development $445 $722 (38)
Services 232 244 (5)
Financing 76 107 (29)
Other revenue 19 25 (24)
-- --
Sales and services revenue $772 $1,098 (30)
==== ======
--------------
Contract Sales
--------------
Company:
Timeshare $502 $859 (42)
Fractional 26 34 (24)
Residential 3 33 (91)
- --
Total company 531 926 (43)
Joint ventures:
Timeshare - - -
Fractional 14 17 (18)
Residential - 30 (100)
- --
Total joint ventures 14 47 (70)
-- --
Total contract sales,
including joint
ventures $545 $973 (44)
==== ====
---------------------------
(Loss) / Gain on Notes Sold
---------------------------
(Loss) / gain on notes sold $(1) $28 (104)
=== ===
*Percent cannot be calculated.
**Denotes non-GAAP financial measures. Please see pages A-20 and A-21 for
additional information about our reasons for providing these alternative
financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Summary of Restructuring Costs and Other Charges
($ in millions)
2009
----
Third
External Quarter Year
Line Description Third Quarter to Date
-------- ----------- ------------- -------------
Timeshare
sales and Mark-to-market
services of residual
revenue interests $(3) $22
Contract sale
cancellation
allowances - 4
-- --
Timeshare
sales and
services
revenue (3) 26
Timeshare - Contract sale
direct cancellation
expenses allowances - (1)
- --
Timeshare -
direct
expenses - (1)
Restructuring
costs Severance 4 16
Facilities
exit costs 5 27
Development
cancellations - 1
- -
Restructuring
costs 9 44
General, System
administrative development
and other write-down - 7
Accounts
receivable and
guarantee
charges 1 4
Reserves for
security
deposits, net
of prior year
reserves - 38
- --
General,
administrative
and other 1 49
Provision
for loan Loan
losses impairments - 43
- --
Provision for
loan losses - 43
Equity in Contract sale
(earnings) cancellation
losses allowances 1 3
Investment
impairment - 30
- --
Equity in
(earnings)
losses 1 33
- --
Restructuring
Costs & Other
Charges Total 8 194
Tax Impact (4) (76)
-- ---
Restructuring
Costs & Other
Charges Net of
Tax $4 $118
== ====
MARRIOTT INTERNATIONAL, INC.
Timeshare Strategy -
Impairment Charges Summary
Third Quarter 2009
($ in millions)
Impairment
Charge
------
Third Quarter 2009 Operating Income Impact
Inventory impairment $529
Property and equipment impairment 64
Other impairments 21
---
Total operating income impact 614
---
Third Quarter 2009 Non-Operating Income Impact
Joint venture impairment 71
Loan impairment 40
Funding liability 27
---
Total non-operating income impact 138
---
Total impact $752
====
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
EBITDA and Adjusted EBITDA
($ in millions)
Fiscal Year 2009
----------------
Total
First Second Third Year
Quarter Quarter Quarter to Date
-------- -------- -------- -------
Net (Loss) / Income
attributable to Marriott $(23) $37 $(466) $(452)
Interest expense 29 28 27 84
Tax provision, continuing
operations 33 44 (210) (133)
Tax provision, noncontrolling
interest 1 2 1 4
Depreciation and amortization 39 42 43 124
Less: Depreciation reimbursed by
third-party owners (2) (2) (2) (6)
Interest expense from
unconsolidated joint venture 3 6 4 13
Depreciation and amortization
from unconsolidated joint
ventures 6 6 6 18
- - - --
EBITDA ** 86 163 (597) (348)
Restructuring costs
and other charges
Severance 2 10 4 16
Facilities exit
costs - 22 5 27
Development
cancellations - 1 - 1
- - - -
Total
restructuring
costs 2 33 9 44
- -- - --
Impairment of
investments
and other, net
of prior year
reserves 68 3 1 72
Reserves for
loan losses 42 1 - 43
Contract
cancellation
allowances 4 1 1 6
Residual
interests
valuation 13 12 (3) 22
System
development
write-off - 7 - 7
- - - -
Total other
charges 127 24 (1) 150
--- -- -- ---
Total restructuring
costs and other
charges 129 57 8 194
--- -- - ---
Timeshare strategy -
impairment charges
Operating
impairments - - 614 614
Non-operating
impairments - - 138 138
- - --- ---
Total timeshare
strategy -
impairment charges - - 752 752
- - --- ---
Adjusted EBITDA ** $215 $220 $163 $598
==== ==== ==== ====
Decrease over 2008
Adjusted EBITDA -25% -43% -43% -38%
Fiscal Year 2008
----------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- -------- -------- -------- -----
Net Income/ (Loss)
attributable to
Marriott $121 $157 $94 $(10) $362
Interest expense 42 38 33 50 163
Tax provision,
continuing
operations 75 139 103 33 350
Tax provision,
minority interest 1 1 5 2 9
Tax benefit,
synthetic fuel - (6) (1) - (7)
Depreciation and
amortization 41 47 42 60 190
Less: Depreciation
reimbursed by third-
party owners (3) (3) (2) (2) (10)
Interest expense from
unconsolidated joint
ventures 4 4 5 5 18
Depreciation and
amortization from
unconsolidated joint
ventures 5 6 6 10 27
- - - -- --
EBITDA ** 286 383 285 148 1,102
Discontinued
operations
adjustment
(synthetic fuel) 1 2 1 - 4
Restructuring
costs and other
charges
Severance - - - 19 19
Facilities
exit costs - - - 5 5
Development
cancellations - - - 31 31
- - - -- --
Total
restructuring
costs - - - 55 55
- - - -- --
Reserves for
expected
fundings - - - 16 16
Inventory
write-downs - - - 9 9
Contract
cancellation
allowances - - - 12 12
Accounts
receivable-bad
debts - - - 4 4
Residual
interests
valuation - - - 32 32
Hedge
ineffectiveness - - - 12 12
Impairment of
investments
and other - - - 30 30
Reserves for
loan losses - - - 22 22
- - - -- --
Total other
charges - - - 137 137
- - - --- ---
Total restructuring
costs and other
charges - - - 192 192
- - - --- ---
Adjusted EBITDA ** $287 $385 $286 $340 $1,298
==== ==== ==== ==== ======
The following items
make up the
discontinued
operations
adjustment
(synthetic fuel)
Pre-tax Synthetic
Fuel losses $1 $2 $1 $- $4
-- -- -- -- --
EBITDA adjustment
for discontinued
operations
(synthetic fuel) $1 $2 $1 $- $4
== == == == ==
** Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
Total Debt Net of Cash
($ in millions)
Balance at Balance at Better/
End of 2009 Year-End (Worse)
Third Quarter 2008 Change
------------- ----------- -------
Total debt $2,660 $3,095 $435
Cash and cash
equivalents (130) (134) (4)
---- ---- ---
Total debt net
of cash** $2,530 $2,961 $431
====== ====== ====
Range Range
----- -----
As Compared to Balance
at Year-End 2008
Estimated Estimated ----------------------
Balance Balance Better/ Better/
Year-End Year-End (Worse) (Worse)
2009 (a) 2009 (b) Change (a) Change (b)
--------- --------- ---------- ----------
Total debt $2,476 $2,426 $619 $669
Cash and
cash
equivalents (115) (115) (19) (19)
---- ---- --- ---
Total debt
net of
cash** $2,361 $2,311 $600 $650
====== ====== ==== ====
(a) Assumes $619 debt repayment in 2009 and $19 reduction in cash
(b) Assumes $669 debt repayment in 2009 and $19 reduction in cash
** Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Adjusted Third Quarter 2008 and 2009 General,
Administrative and
Other Expenses Excluding Restructuring Costs and Other
Charges,
Deferred Compensation Charges and Certain Litigation Expenses
($ in millions)
Third Third
Quarter Quarter
2008 2009
-------- --------
General, administrative
and other expenses $167 $144
Less: Restructuring costs
and other charges - (1)
Deferred Compensation
charges 7 (8)
Certain Litigation Expenses - (5)
- --
Adjusted General,
administrative and other
expenses** $174 $130
==== ====
** Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Adjusted Fourth Quarter 2008 General, Administrative and Other
Expenses
Excluding Restructuring Costs and Other Charges
($ in millions)
Fourth Quarter 2008
-------------------
General, administrative and other expenses $270
Less: Restructuring costs and other charges (32)
---
General, administrative and other expenses Excluding
restructuring costs and other charges** $238
====
** Denotes non-GAAP financial measures. Please see pages A-20
and A-21 for additional information about our
reasons for providing these alternative financial measures and
the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Internal Planning Assumptions and Related Estimates of
Earnings per Share Attributable to Marriott Shareholders that
Exclude Restructuring Costs and Other Charges, Timeshare
Strategy - Impairment Charges and Certain Tax Items in 2009
Range
-----
Assumed/
Assumed/Estimated Estimated
Fourth Quarter Fourth Quarter
2009 2009
----------------- ---------------
Earnings per share attributable to
Marriott shareholders $0.19 $0.22
Add back: Restructuring costs and
other charges, timeshare
strategy - impairment charges and
certain tax items 0.01 0.01
---- ----
Earnings per share attributable to
Marriott shareholders
excluding restructuring costs and
other charges, timeshare
strategy - impairment charges and
certain tax items** $0.20 $0.23
===== =====
** Denotes non-GAAP financial measures. Please see pages A-20 and A-21
for additional information about our reasons for providing these
alternative financial measures and the limitations on their use.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below, and the press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to (identified by a double asterisk on the preceding pages). Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures are not alternatives to revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
Measures That Exclude Timeshare Strategy - Impairment Charges, Restructuring Costs and Other Charges, Deferred Compensation Charges (Credits), Litigation Expenses, and Certain Tax Expenses. Management evaluates non-GAAP measures that exclude the impact of Timeshare strategy - impairment charges incurred in the 2009 third quarter, restructuring costs and other charges and certain tax expenses incurred in the 2009 first quarter, 2009 and 2008 second and third quarters, as well as estimated restructuring costs and other charges expected to be incurred in the fourth quarter of 2009 and estimated full year 2009 restructuring costs and other charges, deferred compensation charges (credits) incurred in the 2009 and 2008 third quarters of $8 million and ($7) million, respectively, associated with our deferred compensation plan, and litigation expenses of $5 million because those non-GAAP measures allow for period-over-period comparisons of our on-going core operations before material charges. These non-GAAP measures also facilitate management's comparison of results from our on-going operations before material charges with results from other lodging companies.
In response to the difficult business conditions that the Timeshare segment's timeshare, luxury residential, and luxury fractional real estate development businesses continue to experience, we evaluated the entire Timeshare portfolio in the 2009 third quarter. In order to adjust the business strategy to reflect current market conditions, on September 22, 2009, we approved plans for our Timeshare segment to take the following actions: (1) for our luxury residential projects, reduce prices, convert certain proposed projects to other uses, sell some undeveloped land, and not pursue further Marriott-funded residential development projects; (2) reduce prices for existing luxury fractional units; (3) continue short-term promotions for our U.S. timeshare business and defer the introduction of new projects and development phases; and (4) for our European timeshare and fractional resorts, continue promotional pricing and marketing incentives and not pursue further development. As a result of these decisions, we recorded third quarter 2009 pretax charges totaling $752 million in our Consolidated Statements of Income ($502 million after-tax), including $614 million of pretax charges impacting operating income under the "Timeshare strategy-impairment charges" caption, and $138 million of pretax charges impacting non-operating income under the "Timeshare strategy-impairment charges (non-operating)" caption.
During the latter part of 2008 and particularly the fourth quarter, we experienced a significant decline in demand for hotel rooms both domestically and internationally due, in part, to the failures and near failures of several large financial service companies and the dramatic downturn in the economy. Our capital intensive Timeshare business was also hurt by the downturn in market conditions and particularly, the significant deterioration in the credit markets, which resulted in our decision not to complete a note sale in the fourth quarter of 2008 (although we did complete a note sale in the first quarter of 2009). These declines resulted in reduced management and franchise fees, cancellation of development projects, reduced timeshare contract sales, contract cancellation allowances, and charges and reserves associated with expected fundings, loans, Timeshare inventory, accounts receivable, contract cancellation allowances, valuation of Timeshare residual interests, hedge ineffectiveness, and asset impairments. We responded by implementing various cost saving measures, beginning in the fourth quarter of 2008 and which continued in the first quarter through third quarters of 2009, and resulted in first quarter 2009 restructuring costs of $2 million, second quarter 2009 restructuring costs of $33 million, and third quarter 2009 restructuring costs of $9 million that were directly related to the downturn. We also incurred other first quarter 2009 and second quarter 2009 charges totaling $127 million and $24 million, respectively, as well as $1 million in net other credits in the 2009 third quarter, that were directly related to the downturn, including asset impairment charges, accounts receivable and guarantee charges, reserves associated with loans, reversal of the liability related to expected fundings, Timeshare contract cancellation allowances, and charges related to the valuation of Timeshare residual interests. Currently, we expect to incur $5 million to $6 million in restructuring costs and other charges in the 2009 fourth quarter. For full year 2009, we expect restructuring costs and other charges to total $199 million to $200 million as a result of our restructuring efforts and the economic downturn, which includes $194 million of restructuring costs and other charges already incurred in the first three quarters of 2009. These estimates are subject to change.
Certain tax expenses included $26 million in the 2009 first quarter, $17 million in the 2009 second quarter, $13 million in the 2009 third quarter and $24 million in the 2008 second quarter of non-cash charges primarily related to the treatment of funds received from certain foreign subsidiaries, an issue we are contesting with the Internal Revenue Service ("IRS"). Additionally, certain tax expenses in the 2008 second quarter also reflected $12 million of tax expense due primarily to prior years' tax adjustments, including a settlement with the IRS that resulted in a lower than expected refund of taxes associated with a 1995 leasing transaction. Certain tax items in the 2008 third quarter reflected $29 million of tax expense primarily related to an unfavorable court decision involving a tax planning transaction associated with a 1994 sale transaction.
Earnings Before Interest, Taxes, Depreciation and Amortization. Earnings before interest, taxes, depreciation and amortization ("EBITDA") reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is used by analysts, lenders, investors and others, as well as by us, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Adjusted EBITDA. Management also evaluates adjusted EBITDA which excludes: (1) Timeshare strategy - impairment charges of $752 million incurred in the 2009 third quarter (2) the 2009 third quarter restructuring costs and other charges totaling $8 million; (3) the 2009 second quarter restructuring costs and other charges totaling $57 million; (4) the 2009 first quarter restructuring costs and other charges totaling $129 million; (5) the 2008 fourth quarter restructuring costs and other charges totaling $192 million; and (6) the first through third quarters of 2008 impact of the synthetic fuel business. Management excludes the restructuring costs and other charges incurred in the 2009 first through third quarters and in the 2008 fourth quarter and the timeshare strategy-impairment charges recorded in the 2009 third quarter for the reasons noted above under "Measures That Exclude Timeshare - Strategy Impairment Charges, Restructuring Costs and Other Charges, Deferred Compensation Charges (Credits), Litigation Expenses, and Certain Tax Expenses." Fourth quarter 2008 restructuring costs and other charges included $55 million of restructuring costs and $137 million of other charges, including charges and reserves associated with expected fundings, loans, Timeshare inventory, accounts receivable, contract cancellation allowances, valuation of Timeshare residual interests, hedge ineffectiveness, and asset impairments. Management also excludes the first through third quarters of 2008 impact of the synthetic fuel business, which was discontinued in 2007 and which did not relate to our core lodging business, to allow for period-over-period comparisons of our on-going core lodging operations and facilitate management's comparison of our results with those of other lodging companies.
Total Debt, Net of Cash (or, "Net Debt"). Total debt net of cash reflects total debt less cash and cash equivalents. Management considers total debt net of cash to be a more accurate indicator of the net debt that must be repaid or refinanced at maturity (as it gives consideration to cash resources available to retire a portion of the debt when due). Additionally, management believes that this financial measure provides a clearer picture of the future demands on cash to repay debt. Management uses this financial measure in making decisions regarding its borrowing capacity and future refinancing needs.
SOURCE Marriott International, Inc.
http://www.marriott.com
Copyright (C) 2009 PR Newswire. All rights reserved